Stocks Rally as OPEC Split Markets

Stocks rallied in Asia and Europe after OPEC’s surprise announcement of a deal to cut crude output spurred a surge in oil late Wednesday. India’s assets fell after it attacked terrorist targets in Pakistan.

Energy companies led gains on the MSCI All-Country World Index, which is on course for its best quarter since 2013. The ringgit was the best performer among Asian currencies as prospects brightened for Malaysia, Asia’s only major net oil exporter, and the yen slid by the most this month. Sovereign bonds fell amid speculation higher energy prices will revive inflation. After posting its biggest gain in five months, crude slipped under $47 a barrel. India’s rupee fell the most in three months after the biggest military escalation since 1999.

A global oil glut has weighed on crude prices for more than two years, damping inflation, hurting corporate earnings, and leading to negative bond yields in two of the world’s four biggest economies. The Organization of Petroleum Exporting Countries said its members agreed a preliminary deal to trim production to a range of 32.5 million to 33 million barrels per day following informal talks in Algiers, although it won’t decide on targets for each country until a November meeting in Vienna.

“It really caught people on the hop — we weren’t expecting a cut in output at all,” said Derek Mitchell, a fund manager at Royal London Asset Management in London. His fund owns shares of Royal Dutch Shell Plc and BP Plc and has assets under management of 93.8 billion pounds ($122 billion). “It sends a message that there’s now a floor under the oil price. A tighter oil market will support earnings. There’s rightly a great deal of skepticism as to whether this cut will last, but for the time being, it’s a very nice thing to wake up to.”

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell